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United Kingdom

United Kingdom

A lot cheaper in America

The price paid for wind power in Britain is notoriously higher than in almost any other country, but it also costs more to generate power from the wind in Britain than most other places, at least according to the UK government's national energy review. It says the cost of wind generation in the UK ranges from £52/MWh to £74/MWh (EUR 75-106/MWh), a good deal more than in America where the average contract price, derived from data from a variety of sources, comes in at $70/MWh, without wind's production tax credit. That is EUR 52/MWh, using currency conversion rates applicable in July 2007 to avoid the latest slide in the dollar. The comparison is a fair one as wind speeds for onshore installations in both countries are similar -- Britain has slightly better winds than the average on the European mainland.

The greater cost of harnessing wind energy in Britain seems to be down to a combination of higher average costs for a fully installed wind plant, higher operation and maintenance costs, and the use of a higher interest rate than commonly used in America for the energy price calculations (table).

Higher installed costs in Britain could in part be down to the huge expense of gaining building permission in the country's laborious planning system -- and more expensive turbines, among other things. Historically, countries with high power purchase prices have tended to see escalating wind turbine prices.

In a report submitted as part of the energy review process, Impact of Banding the Renewables Obligation -- Costs of Electricity Production, financial advisors Ernst & Young put average installed wind plant costs in the UK at EUR 1612/kW, nearly 50% higher than those in the United States at EUR 1110/kW. The report implies average operation and maintenance costs at around EUR 21/MWh in Britain, three times a quoted EUR 7/MWh for the US. Furthermore, the interest rate used for the UK analysis was 10%, compared with an estimated 8.7% in the US. The higher interest rate pushes up the capital cost element of the UK generation cost to EUR 71/MWh, compared with EUR 44/MWh in the US. The resulting total generation cost in the UK comes out at EUR 92/MWh on average, compared with EUR 52/MWh in the US.

The American numbers are derived from a variety of sources, including a report on wind power costs by Ryan Wiser and Mark Bolinger of the Lawrence Berkeley National Laboratory in California. Another analysis, reported by the American Wind Energy Association, indicates that contract prices in 2006 were in the EUR 57-79/MWh range, which narrows the gap with UK costs.

For the purposes of this comparison, the lifetime of wind plant projects is being taken as 20 years in each case, although some 25 year contracts have been reported in America recently. Lengthening the contract term from 20 to 25 years would reduce generation costs from EUR 52/MWh to EUR 49/MWh.

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